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A growing number of sovereigns issuing inflation-linked bonds is expected to kick-start the nascent market for over-the-counter inflation-linked derivatives, according to bankers at the 17th Annual General Meeting of the International Swaps and Derivatives Association in Berlin last week. France last year joined the club of sovereign inflation-linked bond issuers and Italy and Germany are reportedly planning their first issue.

Grand Cathay Securities Corp., a securities house in Taipei, is looking to enter its first convertible asset swap in the coming weeks. "We're in the final stages--they're just reviewing the ISDA's," said Tony Ko, assistant v.p. of fixed income, referring to the International Swaps and Derivatives Association master documents. The firm received a license to enter asset swaps last year (DW, 6/17).

Toshihiro Hirose, general manager of the international business department at Sumitomo Life Insurance Co., has joined ING Financial Markets in Tokyo in a new role as managing director and head of institutional sales. In this position, Hirose covers foreign exchange, fixed income derivatives, repo and debt markets sales, as well as structured fixed income and credit derivatives products.

One-month euro/dollar implied volatility rebounded to 8.2% from 7.4% on Wednesday following comments from Federal Reserve Chairman Alan Greenspan suggesting rates are on hold. Traders said implied vol had been falling steadily lower because euro/dollar had been trading in a narrow range in the spot market, but Greenspan's comments caused the dollar to weaken and drove vol higher. Common trades saw both investors and hedgers buying euro calls/dollar puts struck at USD0.89-0.90 with spot trading at USD0.882 when the options went through.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market during the week ending April 20. It also tracks facility amounts, ratings, pricing and maturities.

Bob Smith, portfolio manager with Sage Advisory Services, says that, as the economy improves, he will rotate 10% of the portfolio he manages, or $200 million, from triple-A and double-A rated corporates into lower-rated corporate names rated either triple-B or single-A, keeping the overall corporate exposure neutral. The thinking behind this move is increasing corporate cash flows will lead to bond price recovery in his targeted sectors. He declined comment as to what a possible trigger would be for the move.

Bank Leumi USA has been borrowing in the repurchase market and selling commercial paper to add $200 million to its portfolio. The trade is primarily in mortgage-backed securities such as 6.5% 15-year mortgages, five-year balloon mortgages, well-structured planned amortization class collateralized mortgage obligations and U.S. government securities. Robert Giordano, who oversees some $2.2 billion in taxable fixed income for the U.S. subsidiary of the Israeli bank, says the bank is looking to take advantage of the steep yield curve in the two- to three-year area to pick up additional yield when shorter-term rates are low. While most of the $200 million program was complete as of last Monday, Giordano was still watching the direction of the two-year Treasury bond before investing the last $37 million. With two-year Treasuries yielding 3.35% last Monday, Giordano said an additional two to three basis points of tightening would convince him to invest the remaining funds, which would consist of $20 million in MBS and $17 million in U.S. government securities.

J.P. Morgan Fleming Asset Management has been building a moderately short duration position in U.S. Treasuries in its $30 billion global fixed-income portfolio and will take profits once 10-year U.S. Treasury yields reach 5.6-5.7%. Last Tuesday, the yield on the 10-year was 5.2%. London-based Jonathan Griggs, head of macro research for global fixed-income, says the portfolio's U.S. Treasury duration is now at about 0.5 years, versus a neutral duration earlier in the year. He expects this trade to run for at least three more months. For those accounts that are run based on ex-U.S. dollar benchmarks, the firm also has been running a short duration strategy at a quarter to a half year. Griggs says the firm has been focusing on buying German and French government bonds to implement the strategy. About 5% of the portfolio has been allocated to European bonds.

In an unusual twist on the debate over analyst independence, Jamie Dimon, chairman and ceo of BANK ONE, surprised analysts last week by scolding them for being excessive about earning forecasts for next year. Surprising, because he was not talking about some dot.com or another Enron, but his own bank. According to the Financial Times he said in a conference call last week, "In general, you would have to see absolute blue skies to get those very high numbers." He added, "I would caution that when you fly that high, you can get burned."

RBS Financial Markets, the capital markets division of the Royal Bank of Scotland, has hired Stewart Booth to fill the newly created position of head of credit trading. Booth joins from J.P. Morgan Securities and will be responsible for the investment-grade, high-yield and credit derivatives trading businesses, a RBS spokeswoman said. He will report to Symon Drake-Brockman, global head of capital markets, who previously had been covering credit trading as part of his overall duties. It could not be determined what his previous duties had been at J.P. Morgan. Calls to a J.P. Morgan spokeswoman seeking the name of Booth's replacement were not returned.